Let’s face it. All business ideas are not created equal. Startup culture has been revived over the past decade, resulting in a slew of new tech and non-tech businesses. However, many (if not most) of these business ideas are doomed to fail. This can happen for any number of reasons. Maybe your business idea was not sustainable. Maybe you failed to correctly address the needs of your target audience. Maybe you had both a sustainable idea and a deep understanding of consumer needs, but your marketing and branding efforts fell short. In almost every case, however, the root cause for a tech startup failing within the first few years is almost always a lack of funds. This is the primary reason why most entrepreneurs are always on the lookout for an investor or a venture capitalist.
Why Tech Businesses Need Investors And How You Can Attract Them
The relationship between an investor and a potential business opportunity is one based on mutual benefit. The business benefits from the investor’s funds. These funds inject short-term liquidity into the business to help meet business cashflow needs. At the same time, investors can also bring in much-needed capital that can be used to expand and grow business operations. An investor need not always be a person. Corporations can also invest in other corporations, which has often been the case in the internet service industry. As a direct result of this investment and the correct use of it in strengthening infrastructures, today we have widely available Spectrum internet plans and other services. In short, businesses, especially those on tighter budgets, stand to benefit from a liquidity injection.
On the other side of the equation is the trickier aspect. What makes investors or venture capitalists invest in a prospective business? These are usually high-value individuals (or legal entities such as venture capitalist funds) that are always looking for opportunities to add to their wealth. Given that they already have a comfortable cushion in terms of extra funds, it makes sense that they are willing to invest it in a promising business. Especially when the alternative is to park the extra funds in a savings account, or invest it in bonds, shares, etc. A business with the right potential can offer investors a far higher return than many other forms of monetary investment. That is why they are open to offering funds in exchange for part-ownership, a share of profits, and even a key leadership role. But how do you attract one? Here are three good places to start for tech entrepreneurs:
- Leverage Your Network to Find Potential Investors
- Have Concrete and Demonstrable Results
- Look For Talented Co-Founders Instead of Just Investors
Let’s examine these in more detail below.
Leverage Your Network to Find Potential Investors
The best place to start looking for potential investors to sell a “soft” pitch to is closer than you think. People often think their professional networks are limited to the people they know and have worked with. But the fact is, many of the people you know and work with likely have professional networks of their own. Consider this a valuable extension of your own network, especially when it comes to finding a potential investor. Of course, you may not know Warren Buffet directly, and neither might anyone in your extended network. But that doesn’t mean there can’t be a potentially willing investor in your network. Sure, they may not have the star power Warren Buffet or Mark Cuban have, but the money is still just as real. Of course, this would involve a soft pitch, based on introductions at professional conferences, events, and expos. The real pitch will follow in a more formal setting, once the potential investor shows interest in your idea.
Have Concrete and Demonstrable Results
You need investment to get more customers and earn bigger profits. But in many cases, you first need solid profits and customer bases to attract investment. It’s often a classic Catch-22 situation, especially in tech startups. But there’s really no way for entrepreneurs to get an investor to take interest in their business without first offering some concrete results. The initial profit levels and customer acquisition often give investors solid information to base an investment decision on. Remember, many investors specialize in investing in promising tech startups. While early profits and customers do not always guarantee success, they still indicate a workable idea that can be scaled up. This may prove to be a non-negotiable when trying to gather investment.
Look for Talented Co-Founders Instead of Just Investors
What do startups like Apple and Google have in common? They don’t have a single founder but multiple co-founders. Savvy entrepreneurs don’t just pitch a tech product idea or a service model. They also often pitch the success, expertise, and talent of their team. A co-founder can be just as useful to your business as an angel investor, provided you choose the right one. A co-founder won’t just bring funds in return for a share of profits or capital. They will buy into your business in the truest sense. Meaning, they will invest not just their capital, but their efforts, expertise, and their own professional experience as well. The result is, instead of an aloof investor, you have an active business partner who shares your goals and vision.